New kid in the showroom

By
YN /
December 30, 1985

IF it were a movie, you might call it ``Auto Wars 1986.'' It stars those perennial favorites, the Detroit automakers as well as those newer but glamorous stars on the block, the major Japanese carmakers. Now some brash newcomers are forcing their way into the limelight -- and they are doing so in a way that could make this one of the liveliest competitive events of the next year. What's happening, of course, is the introduction of entirely new players in the world carmaker competition. First came the Yugoslavs, with their four-cylinder, front-wheel-drive Yugo, which is on sale in parts of the US for some $3,900, about $1,000 less than its closest American-made competitor. The Yugoslavs plan to import 400,000 cars to the US during the next year. The Romanians are also talking about exporting low-priced cars to the important US market, as is the Soviet Union -- which is gearing up

to sell its Lada in Western Europe, Canada, and, perhaps down the pike, the US.

The most interesting development of all is certain to be the global marketing of the South Korean Hyundai Excel, which will lure consumers into showrooms with a sticker price of between $5,000 and $6,000 and is expected to compete head to head against not only US-built products but also, most significantly, Japanese exports. Indeed, some analysts believe that Japan is already conceding a significant part of the low-price auto market to the South Koreans. US manufacturers, meanwhile, are fighting back wi th special low-interest-rate financing.

South Korea's emergence into the arena of the no-holds-barred auto world is hardly coincidental. With a hard-working population of 41 million people used to living on low wage scales, South Korea has fashioned an economy that has already surpassed many of the nations of Western and Northern Europe in terms of gross national product.

Now, South Korea is moving flat out in developing high-techology products: consumer electronics, computer-related products -- and cars. With a substantial foreign debt to service ($45 billion) and rising public calls for greater political participation than has been allowed under the authoritative rule of President Chun Doo Hwan, it is imperative that the new South Korean industries such as cars and electronics do well in world markets.

In that regard, no other nation is watching South Korea more than Japan. Japanese carmakers, known for their high quality, have increasingly moved out of the low-cost segment into the higher-priced ``prestige'' end of the market. But Tokyo must now be asking: What is to keep the South Koreans from doing the same?